Market Wrap – Recession risks rise

Market was in a cautious mood this afternoon after US weekly initial jobless claims data came in higher than expected and the IMF sounded the alarm about a looming recession.

US weekly initial jobless claims 219,000 vs 203,000 expected. This is the highest since the final week of August and ends a two-month run of falling numbers.

The prior reading was 193,000 which was revised to 190,000 and the four-week average 206,000 against 207,000 priors. Continuing claims came out at 1361,000 vs 1345,000 expected.

In terms of market reaction, we saw the US dollar gaining strength and stock turning lower. Gold started to pullback and so did Bitcoin as risk trades suffer.

Remarks from the IMF are also weighing on sentiment. The World Monetary Fund said that “countries accounting for one-third of global GDP expected to report at least 2 consecutive quarters of contraction this year or next”.

The IMF minister also said that the fund “Expects global output loss of $4 trillion by 2026” and “Fiscal measures should be targeted, temporary. Policymakers must avoid indiscriminate response”.

Additionally the “Probability of portfolio outflows from emerging markets has risen to 40%”. Such bearish comments do tend to spook financial markets. Especially on negative news days.

Reuters has also obtained provisional figures on German government economic forecasts, and they show: 1.4% GDP growth this year and -0.4% GDP next year.

The government also projects Inflation at 7.9% this year inflation at 8.0% in 2023. These are still pretty high numbers, but in truth they are likely to be even higher.

Neil Kashkari from the Fed was also out today and said that “I hope we can bring inflation down without causing a recession” and “If we get help from the supply side, I’m more optimistic in avoiding a recession”.